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At one time, .NET My Services was considered to be a keystone of Microsoft's Web services strategy, a technology intended to put it at the center of the Internet with a recurring stream of revenue from monthly or yearly fees.

In July 2001, Gary Hein, an analyst with The Burton Group, wrote: "If successful, HailStorm will certainly simplify Windows users' Web experience and may fundamentally change the manner in which they use the Internet. Benefits include enabling single sign-on to Passport/HailStorm Web sites, simplified Internet purchasing and payment, and access to personal information (address books, instant messaging lists, e-mail, calendar) from any Internet-connected device, PC, or PDA. HailStorm also has the opportunity to act on behalf of the user, even when the user is disconnected from the Internet."

The company intended to license the .NET My Services service to companies which would then use Microsoft's servers as the repository for their customer's online identities. So what happened?

"There were concerns in the industry about not only security, but also account control in the sense that companies don't necessarily want to give up the control of their customers' information to a central source unless there's a real advantage to them doing that," said Michele Rosen, an analyst with research firm IDC.

Mike Gilpin, an analyst with Giga Information Group, added, "We expected that this would happen based on things that were hinted at a few weeks ago. There was a lot of pushback from some of Microsoft's enterprise customers regarding the issues they had with HailStorm. It wasn't the technology so much as the business model. They didn't want Microsoft to host that information."

"Microsoft is shifting from a model in which MSN was the sole operator of these services to one where software to run user-centric services is available to multiple operators," a Microsoft spokesman said. "Don't confuse an expansion of the operator strategy with any kind of de-commitment from the idea of user-centric web services that help create a more personalized, more consistent experience across the different technologies in an individual's life."

Aside from enterprises' lack of interest in giving Microsoft control of their customers' information, the software giant encountered another obstacle: Web services' primary uptake has been in enterprises that are looking at it as an efficient and cost-effect solution for middleware integration within the enterprise.

Rosen said IDC predicts that will be the trend for the next two years, followed by a period in which companies will focus on exposing applications as Web services for external B2B interactions. Only then, is it likely that consumer-facing Web services will catch on.

"We're past the stage of adopting new technologies for the gee-whiz factor," Rosen added.

So was Microsoft's strategy of focusing on the consumer in its Web services push a mistake? Not necessarily.

"Microsoft is still overwhelmingly a consumer oriented company in terms of their revenue stream," Rosen said. "It makes sense for them to leverage or prepare for the day when Web services become of great use to the end-user."

She added, "If it were any other company, I would say yes, it was a mistake. I do think they need to spend more time talking about Web services in the context of integration and the enterprise."

Still, Microsoft hasn't been single-mindedly focused on the consumer side. Just Wednesday, the company cemented alliances with both global telecommunications provider Cable & Wireless (NYSE:CWP) and infrastructure services and software provider Akamai Technologies Inc. to integrate its .NET with their infrastructures in order to allow their customers to deploy Web services on their respective networks.

That is only the latest of Microsoft's deals for the enterprise space, and it has made some noise about the integration capabilities of the .NET Framework, but the decision to pull away from offering .NET My Services as a service seems to indicate the company will primarily shift its focus to the enterprise now.

"From a consumer point of view, Web services are still largely irrelevant," Gilpin said.

However, the company plans to get mileage out of .NET My Services regardless. According to reports, the company is now considering selling the technology as packaged software rather than as a service, allowing companies to maintain their own identity repositories.

"The primary issue driving the viability of the .NET My Services business model is the degree to which it required customers to trust Microsoft to provide a private, secure and highly available identity service," Gilpin said. "Whatever one may think about Microsoft's actual ability to do this, in the end it only matters what the customers' perceptions are, and, as recently as a few weeks ago at a roundtable discussion in London, Giga was hearing the message loud and clear from several large companies that they do not trust Microsoft with this critical identity data. So, reports that Microsoft is considering a new model that would provide technology products and enable companies (or their trusted third parties) to host their own sensitive identity data are an encouraging sign that Microsoft is listening to customers and responding to their concerns. An even more encouraging sign would be an agreement to work with the Liberty Alliance to ensure interoperability of these services with those implemented on other technology stacks."